Payment File Testing services, how to build the business case for your bank

Once you've decided that Payment File Testing services solve a problem for your bank, next step is to socialise internally and do the hard work of preparing a business case and securing the budget. We've watched the process from the outside many times, and explain some of the components to consider for your business case. 

Banks are onboarding more clients than ever. As a result, the use of relationship managers – or people dealing with people – to carry out these processes is no longer fit for purpose, driving up the risk of human error and inefficiency. Financial institutions (FIs) increasingly need solutions that are not only digital, but also incredibly fast, reliable and automated.

Payment file testing services can help automate onboarding, creating a more seamless and efficient process. However, in a world filled with digital solutions, convincing decision-makers of the importance of new tools isn’t always easy. Bank business teams interested in sourcing a payment file testing solution need to present the business case internally to secure budget approval for the purchase. Here XMLdation explores the business case for payment file testing services, highlighting their role in transforming onboarding and driving efficiency.

Payment file testing: A time-consuming, legacy manual process

Traditional payment file validation is a slow, labour-intensive process. The bank’s onboarding team will manually review client test files, provide feedback and address client questions – often requiring extensive back-and-forth communication. Frequently this inefficiency results in manual payment file testing taking one to two days to complete – causing frustration for both the bank and its client.

While this approach might work on a small scale, it quickly becomes unmanageable as volumes increase. Consider, for example, a situation where a bank needs to perform a mass migration, such as adopting ISO 20022 for corporate clients. This challenge is then magnified by the payment file validation process. Errors and inefficiencies can quickly snowball, damaging client relationships and creating a major bottleneck in onboarding.

Here's how to build the business case.

Business case, component 1: savings in bank resources

 Table 1: Estimated savings assuming cost of 1 FTE is 100,000 USD annually

An important component of the business case is optimisation of resource allocation. Many banks dedicate specialised teams to support client implementations, but manual payment file testing can tie up these valuable resources.

By leveraging payment file testing services, FIs can reduce the burden on these teams. With specialist staff no longer tied up in drawn-out manual payment file testing, FIs can reallocate resources to more complex or value-added tasks. This not only boosts operational efficiency but also frees up teams to focus on strategic initiatives that can, in turn, enhance client service.

Business case, component 2: revenue boost from shorter onboarding time

Table 2: Estimated revenue boost assuming 4 months additional revenue due to earlier go-live for domestic, high value and cross border payments 

A second component of the business case is faster time to revenue. Payment file testing services can significantly accelerate the onboarding process by providing instant feedback when clients upload their payment files. With immediate validation results, FIs can quickly identify and resolve inconsistencies or errors before go-live – eliminating the potential errors and delays typically associated with manual validation.  Payment file testing solutions enables automation, and also allows banks to run KYC and file testing in parallel. As a result, test effort can be reduced by as much as two thirds, and total elapsed time to onboard clients can be reduced by 90%.  These shorter onboarding times allow clients to start transacting sooner. The streamlined process and accelerated go-live timeline enables FIs to start generating revenue based on client activity more quickly. 

Business case, component 3: winning wallet share for larger clients

Table 3: Estimated value of increased wallet share when customer implementations are automated and customer expands business with the bank

In a competitive market, seamless onboarding is a key differentiator for FIs – especially when working with large multinational corporations (MNCs). Larger clients often have more files to test, increasing the burden on the FI’s client implementation team and the likelihood of a painful onboarding experience. In fact, Corporate Treasuries increasingly include onboarding process as a topic to be addressed in the RFPs they issue to banks.

Lengthy implementations can drive major clients to seek alternatives, while a streamlined process on the other hand can minimise drop-off risk. A streamlined process also helps build confidence, making clients more likely to expand the payment services they use with the FI – especially the higher value services such as cross-border payments – and increase wallet share for the FI.

From "nice to have" to business imperative

With customer expectations rising, FIs can no longer afford to rely on incumbent, outdated, manual processes. Payment file testing services are designed to scale effortlessly, whether onboarding a handful of customers or hundreds – ensuring FIs can handle increasing volumes without sacrificing speed or accuracy. As the volumes grow, the return on investment in payment file testing services likewise grows.

It means that investing in a payment file testing service isn’t a luxury but a necessity for any organisation aiming to stay ahead of the curve. This investment enables speedier onboarding, faster time to revenue, and greater certainty and scalability for major clients, while also freeing up capacity to focus on more value-added tasks.

Check out what banks say

Don’t just rely on what XMLdation says. Watch this video to hear what RBC says about the value of payment file testing services for their bank. In the video, Payments Canada, XMLdation and RBC discuss the Payment File Validation Service (PFVS), a revolutionary ISO 20022-enabled service used by financial institutions that simplifies and automates the testing of corporate-to-bank payment files. The PFVS is a Payments Canada online service powered by XMLdation that streamlines processes and greatly reduces errors, saving time and reducing operating costs.

If you prefer a 5 minute read, check our success story on Automating Payment File Testing for a US bank.